Monday, October 13, 2014

Energy sector key to powering prosperity in sub-Saharan Africa

LONDON, ENGLAND: Increasing access to modern forms of energy is crucial to unlocking faster economic and social development in sub‑Saharan Africa, according to the International Energy Agency’s (IEA) Africa Energy Outlook, a Special Report in the 2014 World Energy Outlook series.

More than 620 million people in the region (two-thirds of the population) live without electricity, and nearly 730 million people rely on dangerous, inefficient forms of cooking. The use of solid biomass (mainly fuelwood and charcoal) outweighs that of all other fuels combined, and average electricity consumption per capita is not enough to power a single 50-watt light bulb continuously.

“A better functioning energy sector is vital to ensuring that the citizens of sub-Saharan Africa can fulfil their aspirations,” said IEA executive director, Maria van der Hoeven. “The energy sector is acting as a brake on development, but this can be overcome and the benefits of success are huge.”

In the IEA’s first comprehensive analysis of sub-Saharan Africa, it finds that the region’s energy resources are more than sufficient to meet the needs of its population, but that they are largely under-developed. The region accounted for almost 30 percent of global oil and gas discoveries made over the last five years, and it is already home to several major energy producers, including Nigeria, South Africa and Angola.

It is also endowed with huge renewable energy resources, including excellent and widespread solar and hydro potential, as well as wind and geothermal.

The report finds that investment in sub-Saharan energy supply has been growing, but that two-thirds of the total since 2000 has been aimed at developing resources for export. Grid-based power generation capacity continues to fall very far short of what is needed, and half of it is located in just one country (South Africa). Insufficient and unreliable supply has resulted in large-scale ownership of costly back‑up generators.

In the report’s central scenario, the sub-Saharan economy quadruples in size by 2040, the population nearly doubles (to over 1.75 billion) and energy demand grows by around 80 percent. Power generation capacity also quadruples: renewables grow strongly to account for nearly 45 percent of total sub-Saharan capacity, varying in scale from large hydropower dams to smaller mini- and off-grid solutions, while there is a greater use of natural gas in gas-producing countries.

Natural gas production reaches 230 billion cubic metres (bcm) in 2040, led by Nigeria (which continues to be the largest producer), and increasing output from Mozambique, Tanzania and Angola. LNG exports onto the global market triple to around 95 bcm. Oil production exceeds 6 million barrels per day (mb/d) in 2020 before falling back to 5.3 mb/d in 2040.

Nigeria and Angola continue to be the largest oil producers by far, but with a host of other producers supplying smaller volumes. Sub-Saharan demand for oil products doubles to 4 mb/d in 2040, squeezing the region’s net contribution to the global oil balance. Coal supply grows by 50%, and continues to be focused on South Africa, but it is joined increasingly by Mozambique and others.

The capacity and efficiency of the sub-Saharan energy system increases, but so do the demands placed upon it, and many of the existing energy challenges are only partly overcome. In 2040, energy consumption per capita remains very low, and the widespread use of fuelwood and charcoal persists.

The outlook for providing access to electricity is bittersweet: nearly one billion people gain access to electricity by 2040 but, because of rapid population growth, more than half a billion people remain without it. Sub-Saharan Africa also stands on the front line when it comes to the impacts of climate change, even though it continues to make only a small contribution to global energy-related carbon dioxide emissions.

“Economic and social development in sub-Saharan Africa hinges critically on fixing the energy sector,” said IEA chief economist, Fatih Birol. “The payoff can be huge; with each additional dollar invested in the power sector boosting the overall economy by $15.”

In an “African Century Case”, the IEA report shows that three actions could boost the sub-Saharan economy by a further 30 percent in 2040, and deliver an extra decade’s worth of growth in per-capita incomes by 2040. These actions are:

* An additional $450 billion in power sector investment, reducing power outages by half and achieving universal electricity access in urban areas.

* Deeper regional co-operation and integration, facilitating new large-scale generation and transmission projects and enabling a further expansion in cross-border trade.

* Better management of energy resources and revenues, adopting robust and transparent processes that allow for more effective use of oil and gas revenues.

As well as boosting economic growth, these actions bring electricity to an additional 230 million people by 2040. They result in more oil and gas projects going ahead and a higher share of the resulting government revenues being reinvested in key infrastructure.

More regional electricity supply and transmission projects also advance, helping to keep down the average cost of supply. But the report warns that these actions must be accompanied by broad governance reforms if they are to put sub‑Saharan Africa on a more rapid path to a modern, integrated energy system for all.